Question: The Blazingame Corporation is considering a three-year project that has an initial cash outflow (C0) of $175,000 and three cash inflows that are defined by

The Blazingame Corporation is considering a three-year project that has an initial cash outflow (C0) of $175,000 and three cash inflows that are defined by the following independent probability distributions. All dollar figures are in thousands. Blazingameâ€™s cost of capital is 10%.

a. Estimate the projectâ€™s most likely NPV by using a point estimate of each cash flow. What is its probability?
b. What are the best and worst possible NPVs? What are their probabilities?
c. Choose a few outcomes at random, calculate their NPVs and the associated probabilities, and sketch the probability distribution of the projectâ€™sNPV.

C, C3 Probability $50 60 70 S 40 80 120 $75 80 85 .25 .50 .25

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